Canadian Centre for Economic Analysis

Opportunities and Risks for Distilled Spirits Manufacturing in Ontario

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Distilled spirits manufacturing in Ontario provides significant economic, employment and fiscal benefits to the province. Sales in Ontario support an estimated 30% of the production of distilled spirits locally. Consequently, major changes in the local demand for distilled spirits will impact the margins that local producers earn and thus their fiscal capacity to reinvest in their business.

Structural changes to the environment that could cause bottling and manufacturing facilities to close or exports to decrease or stagnate put the important growth potential of local spirits manufacturing at risk. Current changes to beverage alcohol policy in Ontario risk triggering important structural shifts in the beverage alcohol market, and consequently, to the local spirits manufacturing industry. Excluding distilled spirits from the expansion of beverage alcohol sales to new channels would cause a shift in market share, since access and availability are key drivers of consumers’ purchasing decisions. This would cause a downward shift in local demand, reducing the value of distilled spirits sales by $415 million annually, on average, over the coming decade. Such a change in demand could cause the industry to contract, putting jobs at risk in the province.

The results of the sensitivity analysis of export and local employment levels show that:

  • The continued growth of exports represents an important economic opportunity for Ontarians. As the level of international exports rises, gains in employment and GDP scale up as well. To illustrate, a 25% increase in international exports could increase the industry’s GDP contribution by $102 million over current trends and generate 9,500 job-years over the coming decade.
  • Local employment is sensitive to changes in sales, both domestically and internationally. The analysis found that if 50 jobs are created in the distillery industry, this could support over 4.25 times that number in related industries in the province, and the multiplier increases with the number of jobs created in the industry. For example, an expansion that adds 150 permanent jobs (i.e. 1,500 job-years over the next ten years) would generate 4.5 times that number in additional jobs in the next ten years, adding up to 8,000 job-years. This sensitivity can also work in reverse – for every direct job loss, up to 4 additional jobs are put at risk across Ontario. In total, the closure of a 150-employee plant would put 7,130 job-years at risk over the next decade.